It was such a delight to listen to KC Conway’s Commercial economic forecast at the conference (the long walk through conference hallways is to blame for me missing Dr. Lawrence Yun’s forecast). KC poked fun at Millenials and cannabis as expected and gave such a lighthearted fun-filled presentation that had the jampacked crowd both educated and entertained.
Highlights of KC’s economic forecast:
- GDP has clearly downshifted to maybe 1% by Year end 2016
- The FED will remain “Dovish” on interest rates
- Job growth is NOT holding up at +200k per month. The pace of job creation is slowing
- The best “Job Recovery MSAs” post 2009 recession are in the SE and there is a strong correlation to seaport and inland port MSAs.
- The strong US Dollar is adversely impacting manufacturing and exports
- Among core CRE property types, housing is the healthiest followed by industrial and both will remain so in 2017
- The North American Supply-Chain is being remade from West-coast concentric to East Coast. Two untapped opportunities in this shift are food supply and middle market companies with annual revenues between $10M and $1B.
Florida leads the SE states with 4.9% of US GDP with the total SE GDP making up 21.6% of US GDP.
As goes the national economy with respect to job growth, the SE, South Atlantic, and Trustbelt MSAs are performing better.
Commercial property appreciation has slowed but is still positive.
KC’s CRE Outlook
CRE conditions: There are some supply imbalances, but not a “fall-off-cliff” scenario ahead. There are still supply imbalances in office and retail CRE that will continue to limit construction. Industrial warehouse demand is being fueled by a shift in the supply chain from one concentrated in Southern California to one paralleling the East Coast ports. Multifamily real estate faces overbuilding risk in energy markets like Houston, etc. Hotel CRE is viewed as the most risky property type from both the risk of a business recession in Spring 2017 and overbuilding. A caveat to the aforementioned is Hurricane Matthew.
KC Conway has provided his slides to the NAR conference attendees.